Dealers these days are lamenting that people are canceling their car orders because of the losses they have suffered in the stock market.
"They have lost the money they would otherwise be able to use to buy cars," says a Shanghai-based Suzuki dealer.
About a year ago, my younger brother made a nice bit of money by investing in stocks and he was talking about buying a car. Two weeks ago when I met him, he said he may consider renting a car occasionally.
Inflation in China is still high. In May, the consumer price index went up 7.7 percent year-on-year. The central government has threatened to curb inflation with more interest rate hikes. That's bad news for stock investors as well as car dealers.
Given the unfavorable economic environment, the China Association of Automobile Manufacturers predicts this year's auto sales growth would be around 15 percent.
Mei Songlin, China general manager, J.D. Power Asia Pacific Inc., said annual car sales growth this year could slow down to 10 percent.
What, then, does all this mean to automakers?
While demand has shown clear signs of softening, automakers across China are still ramping up production.
And the result is cutthroat competition and more pressure on profits.
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